Innovation in family firms – a generational perspective

2019 ◽  
Vol 9 (2) ◽  
pp. 126-148 ◽  
Author(s):  
Sebastian Hillebrand
Keyword(s):  
Structural Equation ◽  
Family Firms ◽  
Family Firm ◽  
Family Influence ◽  
Family Management ◽  
Community Innovation Survey ◽  
Firm Innovation ◽  
Data Set ◽  
Content Type ◽  
Family Control

Purpose The purpose of this paper is to clarify the generation–innovation relationship in family firms. The study acknowledges that the degree of family influence on a firm varies over generations and tests if the generation–innovation relationship is affected by two defining characteristics of family influence (family management and intention to transfer family control). Based on recent research that deconstructed a family’s influence, this paper seeks to contribute to disentangling the ambivalent findings on family firm innovation. Design/methodology/approach The study draws on the Community Innovation Survey and analyzes a comprehensive data set of German family firms. The analysis builds on a structural equation model and tests if the two defining characteristics of family influence serve as mediators in the generation–innovation relationship. Findings The study suggests that family firms raise their innovation output over generations. Yet, a considerable fraction of the increase occurs via indirect paths – particularly via the intent to transfer family control to succeeding generations. The results indicate that increased family influence has positive and negative effects on innovation, reinforcing the need for careful application of the family firm definition. Research limitations/implications The sample is exclusively composed of German firms and the generalizability of the findings is limited. Future researchers may also overcome further limitations related to the survey data used. Practical implications The results urge family firm leaders to recognize the vital role of succession planning and non-family management involvement in an innovation context. Originality/value The study deconstructs the varying degree of family influence over generations and adds to the fields of family firm innovation, family firm definitions and typologies.

Does family involvement foster IPO value? Empirical analysis on Italian stock market

2015 ◽  
Vol 53 (5) ◽  
pp. 1125-1154 ◽  
Author(s):  
Alessandro Cirillo ◽  
Mauro Romano ◽  
Otello Ardovino
Keyword(s):  
Initial Public Offering ◽  
Family Involvement ◽  
Family Firms ◽  
Current Knowledge ◽  
Family Firm ◽  
Data Set ◽  
Content Type ◽  
Family Control ◽  
Long Run ◽  
Italian Context

Purpose – The purpose of this paper is to shed light on the relationship between family involvement and Initial Public Offering (IPO) value in the Italian context. Design/methodology/approach – Based on a unique hand-collected data set, the authors test the hypotheses on companies that went public between 2000 and 2011, making inference on 113 firms using OLS hierarchical regressions. The authors quantify the IPO value from an outside investors’ perspective with two measures to proxy for IPO value in the short-term and apply robustness checks for long-run performance. In a stewardship framework, the authors examine demographic variables including family firm status, family involvement in managerial positions and family generations. Findings – The results suggest that family firm status positively influences IPO value, that greater family involvement corresponds to higher IPO value and lastly, that the beneficial effect of family control is mainly attributable to the first generation. The results are robust to alternative specifications of each phenomenon. Research limitations/implications – As a single-country study, the results refer exclusively to the Italian context and thus the evidence provided may not automatically be generalized to IPOs of comparable equity markets. Originality/value – This study expands current knowledge by showing how investors “price” family ownership in an IPO; furthermore the authors assess how certain characteristics of family firms affect the IPOs (e.g. family involvement and intergenerational).

Interactive effects of quality of government and family firm governance on R&D output

2018 ◽  
Vol 25 (4) ◽  
pp. 578-603 ◽  
Author(s):  
Feng Xiaoti
Keyword(s):  
Family Firms ◽  
Agency Problems ◽  
Family Firm ◽  
Interactive Effects ◽  
Family Management ◽  
Policy Makers ◽  
Content Type ◽  
Family Control ◽  
Firm Governance

PurposeThe purpose of this paper is to focus on the interactive effects of intrinsic and extrinsic factors on R&D output by analysing Chinese-listed industrial family firms. It proposes modelling the moderating influence of quality of government (QOG) on the relationship between family firm governance types (family control and family management) and R&D output from the “twin agency” perspective (Stulz, 2005).Design/methodology/approachThe data set is organised as an unbalanced panel. This study exploits random-effects GLS regression, analysing both cross-sectional and time variation, and estimating the mean effects. The GLS model corrects the variance- and sequence-related problems of linear model random items and remains consistent and robust when the error term is heteroscedastic and non-normally distributed.FindingsThe findings provide several empirical conclusions: in areas with a higher QOG, family firms with greater family control (i.e. voting rights of the board) achieve more R&D output than firms with less family control; and QOG has no significant interactive effects with family management (i.e. the ratio of family managers among top managers) on R&D output. The main contribution of this paper is to show that in areas with a higher QOG, greater R&D output for family firms depends on greater family control rather than family management. These findings give a better understanding of the interactive influence of inside and outside agency problems in family firms in general and their R&D output in particular across different cities, and may help both family firms’ leaders and government policy makers to foster innovation by controlling intrinsic and extrinsic agency problems.Research limitations/implicationsTo date, most family firm innovation research has concentrated upon governance and R&D behaviour (Block, 2012; Brinkerink and Bammens, 2018; Chrisman and Patel, 2012; Lee and O’Neill, 2003). Few studies, however, have been performed from the major strategic (control) and operational (management) orientations, into the influence of outside (QOG) and inside (governance) factors upon innovation. This study attempts to fill that gap. It uses patent counts to measure the economic and technological importance of innovation. It argues that different QOG may lead major controllers or executives in family firms to have different motivations, and hence to approach innovation differently from the agency perspective.Practical implicationsThe main contribution of this study is to show that in areas with a higher QOG, higher R&D outputs of family firms depend on higher family control rather than family management, due to the interactive influence of inside and outside agency problems. When family management is high, the direct effect is high, because family management may reduce the principal–agent agency cost (PAAC), but the interactive effect of QOG and family management is not significant. In areas with high QOG, although family management may reduce the PAAC, principal–principal and altruism agency costs may increase. Based on the twin agency theory, differing inside expropriation issues between strategic (family control) and operational (family management) orientations are the main differentiator, one accentuated by the external expropriation issues of QOG.Social implicationsThese results contribute to a better understanding of family firms in general and their R&D output in particular across different cities. The findings also show of interest for government policy makers who should be aware of the significance of FFs’ characteristics for innovation and their incentives to conduct R&D projects.Originality/valueThe research uses Stulz’s (2005) “Twin agency” concept to analyse the interacting effects of state-level agency problems of governments with firm-level agency problems of family firms on R&D output. This paper answers the main question: What are the interactive effects of QOG and family firm governance on R&D output? The main contribution of the paper is to bridging the current gap in the literature.

scholarly journals Radical innovation in family firms: a systematic analysis and research agenda

2020 ◽  
Vol 26 (6) ◽  
pp. 1199-1234 ◽  
Author(s):  
Qilin Hu ◽  
Mathew Hughes
Keyword(s):  
Family Firms ◽  
Radical Innovation ◽  
Family Firm ◽  
Critical Discussion ◽  
Incremental Innovation ◽  
Future Research ◽  
Firm Innovation ◽  
Systematic Analysis ◽  
Content Type ◽  
Research Questions

PurposeInvestigation of family firm radical innovation is burgeoning but far less prevalent than studies of family firm innovation in general. Concurrently, studies repeatedly report that family firms exhibit mostly conservative and incremental innovation rather than more radical ones. This is unfortunate because without radical innovation, family firms risk a competency trap in which long-term competitiveness is lost to more innovative rivals. This situation has led to urgent calls among scholars to explicitly acknowledge the heterogeneity of family firm innovation and to understand the conditions for family firm radical innovation.Design/methodology/approachA systematic review of 51 papers categorized into four scholarly conversations build the foundation for a critical discussion of each line of inquiry.FindingsThe authors analyze 51 leading articles and identify four persistent theoretical positions: (1) RBV and capabilities, (2) agency and stewardship, (3) behavioral agency and socioemotional wealth, and (4) the ability and willingness paradox. The authors identify key research problems and research questions needing urgent scholarly and present a framework that captures their complementary and competing assumptions to enable rigorous future research.Originality/valueTo galvanize and spearhead future research efforts, this paper provides a critical analysis of our understanding of family firm radical innovation with a specific emphasis on the theoretical assumptions at the core of existing investigations and the eight most important research questions in need of answers.

A behavioral perspective on corporate dividend policy: evidence from France

2019 ◽  
Vol 19 (1) ◽  
pp. 102-119 ◽  
Author(s):  
Dhoha Trabelsi ◽  
Saqib Aziz ◽  
Jean-Jacques Lilti
Keyword(s):  
Dividend Policy ◽  
Family Firms ◽  
Investor Sentiment ◽  
Large Data ◽  
Payout Policy ◽  
High Concentration ◽  
Data Set ◽  
Content Type ◽  
Family Control ◽  
Managerial Opportunism

PurposeThis paper empirically examines the catering theory of Baker and Wurgler (2004) in the particular context of France. Considering the characteristics of French market – known for its high concentration of capital – it attempts to highlight the role family control plays in the managerial tendencies to satisfy non-informative dividend demands.Design/methodology/approachThe paper focuses on a large data set of French firms included in the SBF-250 index over a period of 1992-2010. It uses a variety of dividend policy measures, including dividend premium, percentage of dividend-paying firms and probability of paying dividends. It adopts appropriate empirical specifications (time-series and probit models) to substantiate the research hypotheses.FindingsThe empirical findings show that the percentage of payers rises with the dividend premium, and that the dividend premium and the confidence index of French households are negatively correlated. This reflects the sensitivity of dividend demand to investor sentiment. Moreover, results of multivariate panel regression show a positive and statistically significant effect of the dividend premium on the firm’s tendency to pay, after controlling for firm characteristics. Finally, it finds that the dividend premium effect disappears in the case of family-controlled firms. This result is in line with the long-term orientation of family firms.Research limitations/implicationsThe study focuses on the dividend payment behavior of French firms. Although dividends are deeply engrained in France, authors believe that it will be interesting to look at the whole payout policy and particularly the role played by share repurchases.Practical implicationsAddressing short-term catering and managerial opportunism, the results of this study may be of interest for shareholders, potential investors and regulators.Originality/valueTo the best of the authors’ knowledge, this is the first study that provides empirical evidence on Baker and Wurgler (2004) catering theory by considering the particularity of French market where, unlike the US, percentage of dividend-paying firms is high and the corporate ownership structures are different.

Innovation in family firms: an empirical taxonomy of owners using a mixed methods approach

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Udeni Salmon ◽  
Kurt Allman
Keyword(s):  
Mixed Methods ◽  
Family Firms ◽  
Family Firm ◽  
Policy Advice ◽  
Social Implications ◽  
Data Set ◽  
Content Type ◽  
Mixed Methods Approach ◽  
Innovation Approach ◽  
Firm Owners

Purpose The increasingly competitive manufacturing sector has made innovation crucial for the continued survival of family-owned SMEs. However, family firm owners are highly heterogenous and their diverse characteristics influence their approach to innovation. The purpose of this paper is to provide solutions to two heterogeneity related innovation problems: first, the failure of generic innovation policy advice to address the specific types of family firm owners; and second, the difficulty for owners in understanding how their innovation approach compares to their competitors. The solution is to create a taxonomy of family firm owner-innovators which creates innovator types. This taxonomy addresses these two problems: first, the taxonomy enables policy advice to be tailored to a particular innovator types; and second, the taxonomy allows owners to understand the strengths and weaknesses of their particular approach to innovation. Design/methodology/approach The approach is to develop a taxonomy through exploratory factor analysis (n=1,284) and firm owner interviews (n=27) in a mixed methods study. Socio-emotional wealth theory interprets the findings. Findings The findings present a taxonomy of family firm innovators which contains five types: the spontaneous radical, the statist altruist, the patient opportunist, the curious traveller and the insular denier. Research limitations/implications There are two major limitations: first, a taxonomy is static and does not include the temporal dimension of innovation which can change according to the firm lifecycle stage and, by implication, the changing preferences of a maturing firm owner; and second, the mixed methods approach of using two data sets which themselves used differing definitions of “family firm” has introduced the possibility that the constructs developed from the quantitative study may not have the precision or clarity of a study that uses a single data set with a single definition. Practical implications The practitioner implications from the research stem from the diagnostic potential of the taxonomy. SME family firm owners can establish their innovation approach by using the taxonomy to decide which type of innovator they are and by adopting an innovation approach that counterbalances the weaknesses of their type. Social implications The social implications are to improve the innovation potential of the family firm community by offering practical support to their innovation activities. Originality/value The originality of the research is in its contribution to knowledge on the role of ownership type in directing the innovation approach of SME family firms. The value of the research is in offering a theoretically informed original taxonomy that is of both academic and practical value.

scholarly journals Back to the Roots: Applying the Concept of Individual Human Values to Understand Family Firm Behavior

2020 ◽  
pp. 089448652094428
Author(s):  
Philipp Julian Ruf ◽  
Michael Graffius ◽  
Sven Wolff ◽  
Petra Moog ◽  
Birgit Felden
Keyword(s):  
Structural Equation ◽  
Family Firms ◽  
Firm Behavior ◽  
Family Firm ◽  
Equation Modeling ◽  
Socioemotional Wealth ◽  
Individual Values ◽  
Data Set ◽  
Different Dimensions ◽  
Individual Human

This study examines the influence of individual owner-manager values on the different dimensions of socioemotional wealth in family firms. We argue that values of owner-managers in family firms are one of the underlying motivators for socioemotional wealth behavior and used structural equation modeling to test the assumed connection. The results of our data set with 1,003 cases show, in accordance with Schwartz’s value dimensions, that social- and person-oriented values influence different dimensions of the FIBER scale. Our findings help understand the importance of individual values, advance socioemotional wealth research, and contribute to the understanding of family firm behavior.

Sustaining family-firm innovation through value and process principles

2019 ◽  
Vol 41 (4) ◽  
pp. 39-45 ◽  
Author(s):  
Frank Lattuch
Keyword(s):  
Design Methodology ◽  
Family Firms ◽  
Leadership Behavior ◽  
Firm Strategy ◽  
Family Firm ◽  
Related Factors ◽  
Firm Innovation ◽  
Content Type ◽  
High Performing ◽  
A Value

Purpose Organization renewal through innovation represents a difficult managerial challenge in family firms. This paper aims to reveal a framework for sustaining innovation capabilities through a perspective of value and process principles. Design/methodology/approach The author examined the findings from consulting projects in high performing family firms and literature from the areas of family firm strategy and leadership. Findings The author describes how combining patterns of innovative organizations with patterns of high-performing family firms can help leaders to sustain innovation. This study indicates that a value- and process-driven perspective is important for effective innovation. In particular, the four value principles are continuity-, community-, connection- and command-related factors (4C’s). The four process principles, in turn, are profession-, project-, product- and purchase-related factors (4P’s). Originality/value This paper is a part of a wider study of innovative German family firms initiated in 2012. The 4C’s and 4P’s framework suggests a practical means to better implement innovation by reconciling the firm’s innovation strategy, leadership behavior and organizational learning.

Corporate governance in the largest family firms in Latin America

2020 ◽  
Vol 27 (2) ◽  
pp. 137-163
Author(s):  
Pedro Vazquez ◽  
Alejandro Carrera ◽  
Magdalena Cornejo
Keyword(s):  
Corporate Governance ◽  
Latin America ◽  
Board Of Directors ◽  
Latin American ◽  
Family Firms ◽  
Family Influence ◽  
Family Management ◽  
Content Type ◽  
Governance Model ◽  
The Board Of Directors

PurposeThe aim of this study is to explore and understand corporate governance patterns in family firms across Latin America. This is in response to several calls in the academic literature urging for more empirical studies in corporate governance in developing regions.Design/methodology/approachFollowing a configurative perspective, a hierarchical cluster analysis is applied to a sample of the 155 largest Latin American family firms.FindingsThe authors identify three main corporate governance configurations across Latin American countries. First, the exported governance model resembles many characteristics of Anglo-American and Continental Europe governance patterns of public listed control, having independence from the board of directors, and mainly hiring non-family management. Second, the super-familial governance model describes private ownership where one or multiple families control both the board of directors and the top-management team. Finally, the hybrid governance model is the largest cluster identified in the sample and combines governance characteristics of both of the foregoing configurations. This configuration exhibits ownership structured through public offerings of shares combined with leadership of the board of directors by a family member as well as moderate family influence on the board and management.Originality/valueThis is the first study to investigate corporate governance in the largest listed and privately-owned family firms in Latin America. The article extends the conversation on family firm heterogeneity and contributes to the configurative approach in the family business field by offering a cross-country perspective and identifying meaningful taxonomies that are applicable beyond national boundaries.

Familiness, social capital and market orientation in the family firm

2020 ◽  
Vol 54 (7) ◽  
pp. 1731-1760
Author(s):  
Josefa D. Martín-Santana ◽  
M. Katiuska Cabrera-Suárez ◽  
M. de la Cruz Déniz-Déniz
Keyword(s):  
Social Capital ◽  
Market Orientation ◽  
Family Relationships ◽  
Structural Equation ◽  
Family Firms ◽  
Top Management Teams ◽  
Family Influence ◽  
Open Communication ◽  
Content Type ◽  
The Family

Purpose This paper aims to analyse if the family influence on the firm and the relational dynamics inside the family and the firm could create specific familiness resources, which lead to a stronger market orientation (MO) of the family firms (FFs). Design/methodology/approach This study is based on a cross-industry sample of 374 managers in 174 Spanish FFs. Structural equation modelling is used to test the research hypotheses. Findings The climate of family relationships is going to affect the firm’s MO through the influence that this climate has on two relational social capital variables, one in the family area (the identification of the family managers with the FF) and the other in the business area (the level of trust between the members [family and non-family] of the top management teams [TMTs]). Research limitations/implications This study contributes to the literature on the under-researched topic of MO in the FFs by going beyond earlier studies focusing on FFs’ explicit attributes, such as their names, as potential explanatory variables of their marketing behaviour. This study also proposes and analyses new internal antecedents of MO based on the social capital of the firm. Practical implications Business families should promote the adequate governance mechanisms to enhance the quality of family social capital to promote the firms’ social capital and ultimately their MO. With the same aim, family managers should try to orientate their leadership behaviour to transmit their own organizational identification to the rest of the firm’s employees. Also, open communication and shared values should be promoted within TMTs to reinforce firms’ social capital that leads to MO. Originality/value This paper integrates social capital literature with MO literature. It also contributes to the literature on FFs, and specifically to the issue of familiness, by analyzing the effect of specific FF characteristics on MO.

scholarly journals TMT diversity and innovation ambidexterity in family firms

2019 ◽  
Vol 9 (4) ◽  
pp. 377-392 ◽  
Author(s):  
Irina Röd
Keyword(s):  
Family Involvement ◽  
Family Firms ◽  
Firm Heterogeneity ◽  
Family Firm ◽  
Cross Sectional ◽  
Firm Innovation ◽  
Content Type ◽  
Mediating Role ◽  
The One ◽  
The Relationship

Purpose Family firms that simultaneously engage in multiple levels of innovation – incremental and radical – are likely to enjoy performance advantages across generations. The purpose of this paper is to research under which management conditions (i.e. top management team (TMT) diversity in terms of generational or non-family involvement) family firms are more likely to achieve innovation ambidexterity. Also, the paper addresses the mediating role of open innovation (OI) breadth in this relationship. Design/methodology/approach A large cross-sectional sample of 335 small- and medium-sized family firms is used. The hypotheses were tested in a mediation model. The relationship between TMT diversity and ambidexterity is measured using a binominal regression analysis, the one between TMT diversity and OI breadth using a Tobit model. Findings Drawing on the family firm upper echelon perspective, the results indicate that TMT diversity induced through external managers and multiple generations is positively related to innovation ambidexterity. As the mediation analysis reveals, the relationship can be explained by the higher propensity of diverse TMTs to get involved in OI breadth. The findings add to the discussion on family firm heterogeneity and its influence on different kinds of innovation. Originality/value So far, few studies have been concerned with ambidextrous family firms. Contrary to their reputation, this study identifies family firms as radical as well as open innovators. As such, this research takes account not only of the heterogeneity of family firms, but also of the heterogeneity of family firm innovation.

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